The good news about the weak dollar.

The Sinking Dollar Also Has an Upside

The United States as cheap tourist hot spot.

Imagine waking up and finding the value of your assets has been halved. No, you're not an investor in one of those Bear Stearns hedge funds that went belly up. Welcome to London! In Britain, when Big Ben chimes 11 a.m. and 3 p.m., the locals take tea—and American tourists head for the ATMs. With the dollar slumping to a 26-year low against the pound, already-expensive London has become jolly unaffordable. A macchiato at Starbucks, just as unavoidable in England as it is in the United States, runs about $8.

The once-almighty dollar isn't doing a Titanic against just the pound sterling. Currency analyst Ashraf Laidi of CMC Markets in New York notes that the greenback is sitting at a record low against the euro and at a 30-year low against the Canadian dollar. Even the Brazilian real and Argentine peso, the Los Angeles Clippers of currencies, are thriving against the buck. When I asked Laidi where a resident of the world's most powerful nation might find the dollar retaining some relative value, the line went silent.

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The weak dollar is a source of humiliation, for a nation's self-esteem rests in part on the strength of its currency. It's also a potential economic problem, since a declining dollar makes the steady diet of imports on which Americans subsist more expensive and exerts upward pressure on interest rates. And yet there are substantial sectors of the vast U.S. economy—from giant companies like Coca-Cola to mom-and-pop restaurant operators in Miami—for which the weak dollar is most excellent news.

The rusted industrial regions of upstate New York that border Canada have little going for them economically. For the past few decades, they've lost industries and population to places with more-salubrious climates, like pretty much everywhere else. But the strong Canadian dollar is encouraging more cross-border shopping. Chuck Skelling, manager at Towne BMW in the Buffalo suburb of Williamsville, receives a few calls per day from status-conscious Torontonians inquiring about new Bimmers. Because Canadian car prices are based on old exchange rates, the same BMW 335 convertible that retails for $48,000 in the United States sells for the equivalent of $63,000 in Toronto.

The strong euro is making even the most expensive U.S. real-estate markets look reasonable. As a result, residents of Ireland, until recently one of the weakest economies in the developed world, are helping keep New York's condo market aloft. When he built the Centria, a 158-unit, 33-floor wedge across the street from Rockefeller Center, Jules Demchick, chairman of New York-based J.D. Carlisle Development Corp., focused his sales efforts in Dublin. "About 90 percent of the sales have been to Irish people," he said. "We didn't even market it in the U.S."

Many Europeans may view the United States as an arrogant hyperpower that has become hostile to foreigners. But nothing makes people think more warmly of the United States than a weak dollar. Through April, the total number of visitors from abroad was up 6.8 percent from last year, according to the Commerce Department. Should the trend continue, the number of tourists this year will finally top the 2000 peak. Many Europeans now apparently view the United States the way many Americans view Mexico—as a cheap place to vacation, shop, and party, all while ignoring the fact that the poorer locals can't afford to join the revelry. To Germans bearing euros, $5 Cokes at Disney World and $500 hotel rooms in Boston seem reasonable.

The money tourists spend helps put a dent in our chronic trade deficit. So do exports, which, thanks in part to the weak dollar, soared 11 percent between May 2006 and May 2007. For the first five months of 2007, the trade deficit actually fell 7 percent from 2006.

If you—or your mutual fund—own shares in large American corporations, you're a winner in the weak-dollar sweepstakes. Based on data culled from 238 constituents of the Standard & Poor's 500 Index, S&P analyst Howard Silverblatt concludes that the typical member of the index garnered 44.2 percent of its sales outside the United States in 2006. Translating cash received from those sales into weaker dollars puts some fizz into earnings. Last week Coca-Cola's stock bubbled to a five-year high after it reported a fantastic quarter. Foreign sales accounted for 65 percent of Coke's beverage business. Other ur-American companies profiting from this trend include McDonald's (65 percent of sales overseas) and IBM (56 percent).

American tourists, however, shouldn't expect any relief soon. The dollar lost strength the way many marriages break up—slowly, and then all at once. And currencies don't turn on a dime. So, if you want to avoid the pain inflicted by the increasingly pathetic greenback, cancel that summer vacation to England and look to New England. There, the dollar is still treated with a modicum of respect.